The history of PODS

Chronology

• 1994: Conceived at Boeing to support airline planning; relationship quickly developed with MIT researchers
• 1999: MIT/PODS Research Consortium formed; major airlines support and influence PODS development and academic research
• 2000-2011: PODS code develops; airlines benefit from insights; more than 30 MIT dissertations based on PODS simulations and findings
• 2012: PODS Research LLC (PRL) formed to provide airline consulting, support further PODS development, and ensure continued access to PODS software for the MIT/PODS Consortium
• 2015: PRL completed the task of “Perpetuation”, by re-architecting and re-writing the simulator code as agreed with the MIT/PODS Consortium members

Founding and development

In 1994, Craig Hopperstad began development of PODS for Boeing’s purposes, to move beyond the practice of validating revenue management algorithms with simulations that made exactly the same assumptions as the optimization schemes being tested. The core idea was to build a model in two parts – generated passengers who choose among available path/classes; and revenue management systems that set path/class availability based on the airline’s history of passenger bookings.

The objective of this integrated simulation was to replicate both passenger choice behavior and the actual functions of airline revenue management (RM) systems. The simulation models the interaction between RM booking limits and passenger decisions with respect to flights and fares, and tests the impacts of RM practices on the market shares, traffic and revenues of the different competitors in airline networks.

In 1995, Boeing joined with MIT (and Dr. Belobaba) to improve and expand the representation of revenue management forecasters and optimizers within PODS. MIT began investigations of some basic issues in revenue management using PODS (e.g., Is RM a zero-sum game?). Early evaluations of simple scenarios in which competing airlines have differing RM systems in a single market found interactions between the revenue gains of RM and the relative sophistication of seat inventory control practiced by different airlines. Evaluations of RM demand forecasting and unconstraining models showed that the choice of RM demand estimation techniques can yield as many revenue benefits as the choice of booking limit optimizers.

The next big step in revenue management arose from path-based (ODIF) control rather that the leg-based control that was incorporated initially in PODS. Substantial industry involvement guided the further development of RM capabilities in PODS and, in 1996, a high level steering group on research capabilities was constituted consisting of Bill Brunger (Continental), Erik Tilanus (KLM), Jorn-Peter Peterson (SAS) and Louis Busuttil (Cathay Pacific).

In 1999, Hopperstad retired from Boeing and founded Hopperstad Consulting. Boeing granted a license for PODS to Hopperstad Consulting, allowing it to take over responsibility for PODS programming and development. In turn, MIT researchers took the primary role in large-scale testing of alternative scenarios and evaluation of the impacts of airline management systems under competitive market conditions. Building on the PODS research at MIT, Belobaba proposed and created a formal MIT research consortium. The MIT/PODS Revenue Management Research Consortium was launched with an initial membership of Continental, Northwest, KLM, SAS, Lufthansa and Swissair.

From 2000 to 2011, the Consortium flourished, with PODS demonstrating its capability to simulate and evaluate changes in the airline industry (e.g. the advent of low cost carriers offering fare products with fewer restrictions). In this period, the Consortium also made several significant contributions to the industry itself, including the original formulation of “Q” forecasting. At the same time, Hopperstad Consulting engaged in multiple consulting assignments developing proprietary versions of PODS for clients.

In 2012, PRL (PODS Research LLC) was formed with Hopperstad, Belobaba and Brunger as the principals, to continue developing the PODS simulator and provide Consortium support, as well as providing consulting services.